China’s Largest Brokerages Merge: Guotai Junan and Haitong Set to Dominate $1.7 Trillion Sector

Guotai Junan Securities and Haitong Securities, two major state-backed Chinese brokerages, have announced a merger that will reshape the $1.7 trillion brokerage industry. The deal, which involves a share swap, will create a leading firm with assets totaling 1.6 trillion yuan ($226 billion), surpassing Citic Securities to become China’s largest brokerage.

The merger is part of Beijing’s broader strategy to consolidate the brokerage sector amid challenging market conditions. Both Guotai Junan and Haitong are controlled by entities managing state assets for the Shanghai government.

Under the agreement, Guotai Junan will acquire Haitong in a share exchange, pending regulatory and shareholder approval. The firm plans to issue new shares in both mainland China and Hong Kong to fund the acquisition. Share trading for both brokerages was halted on Friday.

Analysts anticipate that this consolidation will accelerate, with more state-backed firms likely to take the lead. The Chinese government has emphasized the need for reform in the brokerage sector, with new directives encouraging mergers and acquisitions among the over 140 Chinese and foreign players.

In March, China’s securities regulator announced plans to develop ten leading institutions by 2035, aiming to create internationally competitive investment banks. Recent months have seen several smaller brokerages merging, including Ping An Securities and Founder Securities.

The merger follows a recent call from Shanghai Communist Party Secretary Chen Jining for Guotai Junan to become a globally competitive investment bank. This deal is expected to spur further mergers and acquisitions in the industry, with potential deals involving CICC, Galaxy Securities, Citic Securities, and China Securities on the horizon.

Representatives from CICC, Galaxy Securities, Citic Securities, and China Securities have not yet commented on the merger news.